7. If Canadian citizens decide to save a smaller fraction of their incomes, which statement would...

7. If Canadian citizens decide to save a smaller fraction of their incomes, which statement would best describe the effects?

a. Canadian domestic investment increases, and Canadian net capital outflow increases.

b. Canadian domestic investment increases, and Canadian net capital outflow decreases.

c. Canadian domestic investment decreases, and Canadian net capital outflow increases.

d. Canadian domestic investment decreases, and Canadian net capital outflow decreases.

8. Suppose that from 1980 to 1987, Canadian net capital outflows decreased. According to the open-economy macroeconomic model, what could have caused this?

a. an increase in the demand for Canadian currency in the foreign-currency exchange

b. a decrease in the demand for Canadian currency in the foreign-currency exchange

c. an increase in the supply of loanable funds

d. a decrease in the supply of loanable funds

Solutions

Expert Solution

7. Option D

Explanation: Lower savings would lead to lower investment as well as lower net capital outflow.

8. Option D

Explanation: It increased net capital inflow and decreased net capital outflow.

Rahul Sunny answered 2 years ago

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